Repair Bad Credit Yourself for a Better Credit Score

It's important to repair bad credit yourself. A poor credit history not only makes it more difficult to borrow money, the cost of borrowing will also be a lot higher. In order to get acceptance for low interest rate loans, credit cards and mortgages it's necessary to take steps to fix your credit score. Any adverse entries will show on your credit report for the next 7 years. This increases to 10 years if you've filed for chapter 7 bankruptcy. Although there are ways to get a higher credit score fast, recovery from the more serious credit transgressions could take some time to achieve. Don't delay rebuilding credit as the sooner the process is started, the sooner you'll qualify for credit.

Repair Bad Credit Yourself By Correcting Credit Report Errors

Lenders cannot tell the difference between bad data and bad credit. The Fair Credit Reporting Act gives you the right to correct any erroneous data within 30 days. The first step towards effective credit report repair is getting hold of a free credit report for Experian, Equifax and TransUnion. Things to look for include:

Applications for credit that weren't made by you.
Debts that should read as "paid as agreed" when they show as "paid charge off" or "paid derogatory".
Lapsed debts that are greater than 7 years old.
Duplicate credit searches.

Change the Way You Manage Revolving Debt for a Better Credit Score Fast

Never max-out a charge card or exceed the limit as this will result in the average score falling by about 70 points.Don't put all of your debt onto one card as it's better to spread your debts over several cards. A higher credit score can be achieved by never using more than 30% of the allocated credit limit in a single month. Whether the outstanding balance is settled at month end is irrelevant.

Pay Down Debt for a Higher Credit Score

The amount owed relative to your income is a major score determinant. In fact, it is the second most important criteria to payment history and accounts for up to 30% of your FICO score. Before borrowing additional money, it's advisable to reduce the amount that you owe to creditors. Most lenders insist on an income-to-debt-ratio of under 36%. In practice, the lower the amount owed the better as customers with a lower ratio are less likely to default on their credit agreement. Use savings to pay down debt or even consider borrowing money from a family member. Clearing high APR and secured debt not only constitutes better money management, it will also lead to improved credit.

Revolving and Installment Debt to Repair Bad Credit Yourself

In order to repair bad credit yourself, it's necessary to make a series of timely repayments in connection to both types of debt. Even after filing chapter 7, the law requires that any mortgages and car loans are reaffirmed so installment debt is often a given. Credit card debt is unsecured so most consumers choose to eliminate this form of debt. However, it's possible to get either an unsecured card with a low limit or a secured credit card with a far higher credit limit. The latter is recommended but, as alluded to above, try to use less than 30% of the your limit each month. Always pay punctually or the entire process of fixing your credit score will need to start again from scratch.

How Long Does Bad Credit History Repair Take?

People who have relatively minor problems, credit report errors or need to redistribute their debts may be able to fix bad credit fast. It can take longer to recover from more serious credit breaches, such as default, delinquent accounts, foreclosure and bankruptcy. No matter how poor your credit, it's possible to repair bad credit yourself by following the advice provided above.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.

Updated: 28 March 2011